The growing cost of long term care

By Chris Orestis

Life Care Funding

In a recent report, the government agency that administers Medicare and Medicaid detailed the possible impact of cuts proposed in health care reform passed by the House of Representatives. The study states that the proposed $500 billion in cuts would be so severe that hospitals and nursing homes would be forced to stop accepting Medicare as payment.

The report says that seniors would suffer from additional reductions in benefits and services to pay for the $500 billion in reduced spending. The White House answered back against the report's findings by saying the reductions would come in the form of reduced wasted spending on fraud and abuse in the system and from administrative savings through such efficiencies as expanded use of electronic medical records. Democrats also contend that these cuts would extend the life of Medicare a number of years before becoming insolvent.

As is often the case, both sides are focusing on the aspects of this study that bolster their position in the debate. But regardless of who is right, one truth is clear -- seniors need to be preparing themselves for less and less financial support coming from the government. The burden to cover the costs of senior housing and long term care will continue to be pushed back on seniors and their families and people should do all they can to prepare for the inevitable.

Two recent reports add more evidence to the alarming trend of financial pressure being pushed back onto seniors and their families as they reach the age that the costs of long term care play a central role in their lives. In addition to Medicaid cuts in the states and cuts to Medicare being proposed as part of health care reform, more money will continue coming out of seniors' pockets.

The annual MetLife Mature Markets Institute study tracking the costs of long term care in assisted living, nursing homes and home health care was recently released showing significant increases in costs over the last year:

Nursing home costs rose 3.3 percent

Assisted living costs rose 3.3 percent

Home health care costs rose 5 percent

Adult day care costs rose 4.7 percent

The increasing costs of long term care can be attributed to the most basic economic principal there is: supply and demand. The economic crisis has slowed the construction and expansion of facility based care. Also, more people requiring long term care are having a difficult time selling their homes. As the population of seniors demanding long term care services of every type increases, the supply of options and dollars is decreasing -- driving up the costs.

In another alarming report, the costs of Medicare premiums will rise 15 percent next year. This will push the monthly Medicare premium above $100 for the first time in history. The final outcome of this increase, or measures to offset the increase, is being debated in Congress as part of health care reform. Regardless of the outcome, this will now become a yearly struggle as the population going onto Medicare is exploding-- and just when the country is least prepared financially to accommodate the demand.

The realities of a global economic recession intersecting with explosive growth in the senior populations will create increasing pressures for the United States. More people needing help (money), with fewer resources to go around (money), equals hard choices about how to help those who need it most (money). Increasing emphasis on the individual to shoulder more of the costs of their senior years will grow quickly. Moves to cut COLAs, raise the minimum age for Medicare and cut Medicaid funding in the states will become more common occurrences.

The Baby Boom generation is still in the early stages of moving into their retirement years and the amount of money required to support these programs is already overwhelming. As economic and demographic trends over the coming years continues to challenge the government's ability to keep pace, seniors and their families must do all they can to prepare themselves financially for the costs of retirement and the even greater costs of long term health care.

*For further information, or to contact this author, please leave a comment and your e-mail address in the forum below.